What to Expect from Mortgage Fees
When we go through the homeownership process and eventually apply for a loan, many of us are often shocked at the attached fees, also known as closing costs.
In general, “closing costs” pertain to the down payment. They can be anywhere from three to over 20 percent depending on the mortgage and about six percent of the total loan, which typically amounts to $2,500 to $5,000. Apart from the down payment, the fees essentially help the lender process the loan and, as a result, you should be given a Loan Estimate of what those costs will be.
Yet, while the fees are associated with processing, they can be broken down into third-party and government services. Varying with the loan program, closing costs may come from:
- Appraisal: This service is needed to determine the fair market value of a home and is usually required by the lender before approving a mortgage.
- Home Inspection: More common for government mortgages, this service ensures the property is structurally sound and safe to live in.
- Credit Report: A standard part of any mortgage application, the lender obtains a copy of your credit report.
- Attorney's Fees: While not required in all states, this is a standard fee in Connecticut, where an attorney must be present at closing.
- Prepaid Interest: With all upfront costs, you may be asked to pay the interest from the date of settlement to the first monthly payment.
- Origination Fee: Considered one of the most important costs, this amount covers document preparation, notary fees and the lender's attorney fees. Expect to pay about one percent of the amount you're borrowing.
- Private Mortgage Insurance: If you're putting less than 20 percent down on a home, this fee insures the lender in the event you default on your mortgage.
- Guarantee Fees/FHA Mortgage Premiums: A fee for government-originated loans, this amount is about two percent of the mortgage.
- Property Taxes: You may be expected to pay about two months of property taxes up front.
- Closing Fee: This amount goes to the Title Company or attorney for conducting the closing.
- Title Company, Title Search or Exam Fee: The lender may request a detailed search of property records regarding the home you're about to purchase.
- Survey Fee: Separate from the Title Search, a survey may be needed to determine the property's boundary lines.
- Courier Fee: This covers the cost of transporting documents.
- Owner's and Lender's Title Insurance: These amounts cover the cost of assuring the lender you own the home and protect you in the event someone challenges that fact.
- Homeowners Insurance: You may be expected to pay part of this cost upfront, which protects against possible damage to the home.
Closing costs are part of the home buying process, whether you're taking out a mortgage on your first home or refinancing an existing one. To learn more about what loans Ion Bank offers, contact us or stop by one of our locations today.
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